Today, the Financial Markets Authority (FMA) has released its annual anti-money laundering and countering financing of terrorism monitoring report (AML/CFT Report), stating: "Next year we will be increasing our desk-based and on-site monitoring, looking for compliance with the Act."
Here is an overview of the FMA's key findings:
Governance and management oversight
The FMA warns that if deficiencies are identified in a reporting entity's (RE) governance and management oversight, there would likely be a stronger regulatory response. The FMA emphasised the public formal warning issued this year when a RE's AML/CFT compliance programme did not contain a cohesive process for escalating, monitoring and managing AML/CFT issues.
The FMA expects that REs have a documented process for escalating material matters to senior management or governance committees, and a good record of any decisions and recommendations (including their rationale).
The FMA emphasised REs' obligation to ensure staff are trained on AML/CFT matters. It found that some REs provided training before the AML/CFT Act came into full effect, but have not continued training or trained new staff.
Due diligence on high-risk customers
The FMA carried out a number of targeted visits to REs after the release of the Panama Papers. It found there was a varying quality of due diligence on high-risk customers.
The FMA expects that high-risk customers' CDD and monitoring is prioritised. It will be looking for written processes which provide for senior management oversight for on-boarding high-risk customers, and fully documented decisions.
On-going consumer due diligence and account monitoring
Some key issues remain: monitoring systems not fit for purpose, no written process for investigating alerts, lack of reports on suspicious transactions, lack of knowledge about existing customers or inadequate plans for review of existing customers' identity documentation.
The FMA expects that REs should have a plan to update documentation of existing customers to current standards, and put in place an effective transaction monitoring system to alert REs of unusual customer activity for investigation.
In 2017, the FMA's particular focus will be on AML/CFT documentation, and the level of management and board oversight.
We can help with board and staff training, and improved compliance documentation for your AML/CFT programme.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.